Is revenue a good metric for early stage startups?

Edited excerpt from Revenue vs. Value by Danielle Morrill:

While revenue is a useful signal to founders, indicating they are creating something people want, it is also a lagging indicator of success. By the time a startup has a predictable and steadily growing revenue stream that means it has built a product and brought it to market successfully.

Early revenue can be dangerously distracting for founders. Once you have some of it you want more, and without strict discipline it’s easy to optimize for immediate gratification rather than the big vision.

Don’t let revenue be your vanity metric.

(1) Compare this to Growth rate in revenue or active users is the paramount startup metric.
(2) Even if revenue isn’t the right metric for early stage startups, you still need to know where your revenue will come from. You need to know the end game. This is because the key goal of early stage startups is to achieve product-market fit, and product-market fit requires a market, a business model and customer engagement.
(3) Delaying figuring out your source of revenue can be dangerous, because monetization of free products after the fact is challenging.
(4) For these reasons, there’s a strong argument to be made that even with freemium, it’s easier to start with the paid product.

2 thoughts on “Is revenue a good metric for early stage startups?

  1. The early stage revenue motivates the stake holders and provides assurance and promise of good beginning.Maintaining existing customers to new customer of different test and guile is very challenging tasks. The image creation and sustaining the brand may result ever increasing revenue and capitalization.

  2. Pingback: Get to profitability — here’s how | A Founder's Notebook

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s